The Fed’s Age of Inflation

Serious inflation has been absent from the American scene for years–but for the Federal Reserve, the threat remains omnipresent. Indeed, recently released transcripts show that even in the dark days of the 2008 financial crisis, many Fed officials were more worried about inflation than the economy collapsing around them.

Maybe they’re just born that way.

At their confirmation hearings before the Senate Banking Committee on Thursday, Fed board nominees Stanley Fischer and Lael Brainard dutifully noted the risks of high inflation, while skirting the issue of whether it is too low. This even though the Fed’s preferred measure of core inflation, at 1.1%, is well short of its 2% target. Headline inflation just 1.2%.

Experience likely breeds suspicion of such low numbers. Since turning 18, Mr. Fischer, now 70 years old, has seen an average U.S. inflation rate (including food and energy costs) of 3.6%. Ms. Brainard, who is 52, has seen an average of 2.8%.

Both of them may also have been playing to their audience. The median age for a U.S. Senator is 63. As adults, 63 year old Americans have experienced an average annual rate of inflation of 3.8%.

The voting members of the Fed’s policy-setting committee who have experienced the highest inflation: Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser have both seen an average rate of 3.8% as adults. Little wonder that both are considered inflation hawks. In contrast, the Minneapolis Fed’s dovish Narayana Kocherlakota has seen an average rate of 2.5%.

That’s as nothing against the median-aged American, though. At 37, they have seen inflation average just 1.9% since turning 18. Call them Generation QE.

About Real Time Economics

Real Time Economics offers exclusive news, analysis and commentary on the U.S. and global economy, central bank policy and economics. Send news items, comments and questions to the editors and reporters below or email realtimeeconomics@wsj.com.